TechnipFMC PLC (NYSE:FTI) Meets Peter Lynch's GARP Investment Criteria

In the world of long-term investing, few strategies have shown the lasting success of Peter Lynch's method. The former Fidelity Magellan Fund manager supported finding fairly priced growth companies with good financial health, a method now called GARP (Growth at Reasonable Price) investing. Lynch's system highlights lasting earnings growth, fair valuations, and strong balance sheets, concentrating on businesses that can provide steady results over long times instead of following speculative trends.

Meeting Peter Lynch's Growth Criteria

TECHNIPFMC PLC (NYSE:FTI) displays several traits that match Lynch's investment thinking. The company's past performance shows the kind of lasting growth Lynch appreciated, while its current valuation numbers indicate potential for continued increase.

• EPS Growth (5-Year): 24.99% - This passes Lynch's minimum 15% level while staying under his 30% limit for unstable growth
• PEG Ratio: 0.70 - Much lower than Lynch's maximum of 1.0, suggesting the stock could be undervalued compared to its growth path
• Return on Equity: 28.01% - Greatly exceeds Lynch's 15% need, showing efficient use of shareholder money
• Debt/Equity Ratio: 0.15 - Stays well under Lynch's preferred maximum of 0.25, showing careful financial management

Financial Health Assessment

TechnipFMC's fundamental profile shows a company with significant strengths in profitability next to some areas to watch. The company gets a 6 out of 10 in our full fundamental rating system, placing it well within the Energy Equipment & Services industry. The most notable parts of TechnipFMC's financial situation include outstanding profitability measures, with Return on Equity and Return on Invested Capital both in the top group of industry peers. The company's margin trends display steady betterment, especially in operating and profit margins, while keeping a careful debt profile that Lynch would like.

The balance sheet shows a varied picture about liquidity, with current and quick ratios that are lower than many industry rivals. However, the company's solvency measures stay firm, backed by very good debt-to-free-cash-flow ratios and continuing share reduction programs. From a valuation viewpoint, TechnipFMC trades at fair multiples compared to both industry averages and wider market indices, with the PEG ratio indicating special value when growth is factored in.

Detailed fundamental analysis gives more understanding into these numbers and their meaning for long-term investors.

Growth Path and Industry Position

As a top energy services company focused on offshore hydrocarbon production solutions, TechnipFMC works in what Lynch might call a "dull" but necessary industry. The company's two-part method, covering both subsea and surface technologies, gives variety within the energy sector while keeping operational focus. This business model has created steady revenue growth and notable earnings expansion, with EPS growing 119% in the last year.

Future growth estimates, while slowing from past highs, remain good with expected EPS growth of 12.01% each year. This match between past results and future outlook fits well with Lynch's liking for companies that can keep, rather than sharply increase, their growth rates. The company's technical skill in offshore projects places it to gain from continued global energy demand, especially in deepwater exploration where its integrated solutions offer competitive benefits.

Investment Considerations

For investors using Lynch's method, TechnipFMC stands for the kind of company that mixes clear business operations with quantifiable financial control. The company's careful debt method, high returns on capital, and fair valuation relative to growth build a profile that matches long-term wealth creation. While the energy services sector has natural cycles, TechnipFMC's focus on offshore projects, which usually involve longer investment timelines, gives some buffer from short-term commodity price changes.

The company's continuing share buyback program and getting better operational margins further support the case for patient capital allocation. Lynch frequently stated that investors should concentrate on business fundamentals more than short-term price changes, and TechnipFMC's financial numbers indicate underlying business health that may not be completely seen in its current valuation.

For investors wanting to look at more companies that meet Peter Lynch's investment rules, our Peter Lynch Stock Screen gives regularly updated results using these same measures.

Disclaimer: This analysis is based on fundamental numbers and past data. It is not investment advice. Investors should do their own research and think about their personal financial situation before making investment decisions. Past results do not guarantee future outcomes, and all investments have risk of loss.